Lawsuit alleges Kalshi 'duped' gamblers into illegal sports bets against the house

Kalshi, one of the nation's largest "prediction markets," has been hit with a nationwide class action lawsuit in the Southern District of New York, alleging that the platform has predominantly become an illegal sports betting site that secretly tricks consumers into rigged bets against the house, when they think they're betting against other users on the platform.

The suit, filed this week, was reported on X by sports betting and gaming attorney Daniel Wallach.

"Consumers on Kalshi do not only bet against each other — they also bet against the House. Kalshi operates institutional market makers, which also gamble against the consumer," stated the lawsuit. "Kalshi also partners with hedge funds, such as Susquehanna International Group, to provide a sophisticated 'market making' service for Kalshi by being on the other side of consumers’ bets."

"As a result, individual consumers hardly stand a chance, all the while thinking they are just betting against other consumers," the suit said.

Even worse, the suit argued, the platform targets underage users.

"Kalshi enables addictive gambling behavior by underage adults, problem gamblers, and others by enticing them to gamble with 'free' money while ensuring them that they are legally gambling against peers. For example, Kalshi runs advertisements through sponsored influencers," including one who is 15 years old, said the suit. "On September 19, 2025, Kalshi also announced that it was targeting college campuses. Kalshi publicly announced that it was partnering with college clubs as part of 'KalshiU' to bring in 'the next 100M users.'"

The suit alleges violations of gaming laws in a number of states, including New York, California, and Florida.

This comes amid a yearslong debate about the legalization of sports betting, which has seen an explosion around the country through both generalized betting platforms and so-called "Daily Fantasy" platforms like DraftKings and FanDuel, who have argued various loopholes to avoid officially calling themselves gambling. A number of politicians have grown alarmed about the negative impacts, with Gov. Mike DeWine (R-OH) saying he regrets legalizing sports betting in his own state.